I have recently upgraded Fedora Core 2 to Fedora Core 3 using Yum. The steps are outlined below:
Import the Fedora RPM-GPG-KEY if not done so already.
Force install fedora-release and yum rpms of Fedora Core 3.
# rpm --import /usr/share/rhn/RPM-GPG-KEY-fedora
Install FC3 kernel. This should also update mkinitrd as a dependency of the kernel.
# wget http://download.fedoralegacy.org/fedora/3/os/i386/fedora-release-3-8.i386.rpm
# wget http://download.fedoralegacy.org/fedora/3/os/i386/yum-2.1.11-3.noarch.rpm
# rpm -Uvh --force fedora-release*.rpm yum*.rpm
Set lilo to use the FC3 kernel prior to rebooting.
# yum update kernel
Remove any old existing kernels.
# lilo -v -v
# lilo -R 2.6.12-1.1381_FC3
Continue with the upgrade.
# yum remove kernel-2.4*
If you get any "Dependency Errors", the mentioned packages needs to be removed prior to a successful yum upgrade.
# yum upgrade
Reboot once the upgrade is successful.